Prediction Markets Legal Status Tracker
Are prediction markets legal in every state? Where things stand with the courts and regulators regarding Kalshi, Robinhood, Crypto.com and others.
The legality of sports betting via prediction markets in the US is being tested in various ways around the country. The Event Horizon will update this resource on the status of prediction market legality as events warrant.
The basics of prediction markets legality
Prediction markets operate federally under the Commodity Futures Trading Commission, which allows for the trading of event contracts via registered exchange. The industry started with financial and election markets, but earlier this year expanded into sports event contracts via Kalshi and Crypto.com.
The CFTC has the ability to prohibit event contracts that it views as “involving gaming” and are “contrary to the public interest.” It has chosen not to do so with any sports event contracts.
A number of states have argued that sports event contracts are in effect sports betting and require a license to operate in their jurisdictions. Sports betting exchanges have operated in some states by obtaining licenses.
The friction between state gaming regulators and prediction markets has led to gaming regulators sending cease-and-desist letters, which has resulted in litigation in courts across the country.
States cease-and-desist letters to prediction markets
Eight states have sent cease-and-desist letters to Kalshi and sometimes others, including Crypto.com and Robinhood, to The Event Horizon’s knowledge.
Massachusetts has also sued Kalshi to stop them from offering sports event contracts in the state, but apparently did not send a C&D.
The C&Ds generally cite state laws and take the position that Kalshi’s sports prediction markets require a license to operate.
Some of these states have also sent letters to sports betting licensees, warning them not to offer sports prediction markets in their jurisdictions or elsewhere.
States vs. prediction markets court cases
The cease-and-desist letters have led to a number of lawsuits around the country trying to clarify the legality of sports event contracts via prediction markets.
Generally, the courts in these cases are being asked by the operators for a preliminary injunction against the state.
Prediction markets currently operate in all 50 states, except Crypto.com has said it is no longer serving Nevada after a court loss.
You can read more on the legal arguments on these (and other) cases here.
Maryland
Kalshi sued state officials after a C&D, but lost its motion for a preliminary injunction in district court. Kalshi appealed the case to the Fourth Circuit.
The next deadline is Dec. 15 for Maryland’s brief.
Massachusetts
This is the only one of these cases where the state sued a prediction market operator first.
The case has largely been about jurisdiction to date, with an effort to get the case out of the state court system and into federal court being denied.
Kalshi has now filed a motion to dismiss the case, and a hearing is scheduled for Dec. 9.
Nevada
There are three different lawsuits here, involving Kalshi, Crypto.com and Robinhood, with the first two being the most important as things stand.
Crypto.com pulled out of the state after losing its motion for a preliminary injunction. It has appealed the loss to the Ninth Circuit.
Kalshi initially won a preliminary injunction in the state. But the state asked the court to dissolve the preliminary injunction after the Crypto.com ruling. The judge in the case has said he is leaning toward dissolving it.
New Jersey
Both Kalshi and Robinhood have sued the state, but the Kalshi case is front and center.
Kalshi won a preliminary injunction in district court, and the state has appealed the case to the Third Circuit. Oral arguments were held in September.
New York
Kalshi sued New York after receiving a cease-and-desist letter in late October. The case is in district court.
Ohio
This is one of the newer cases, with Kalshi suing the state in October. An informal conference was held in early November. Briefing is expected to be completed by early December.
Tribal vs. prediction markets court cases
Tribes in two states have sued Kalshi and/or Robinhood for offering sports betting on their lands, in violation of the Indian Gaming Regulatory Act.
California: Three tribes sued to stop Kalshi and Robinhood in July. A federal court denied the tribes’ motion for a preliminary injunction.
Wisconsin: The Ho-Chunk Nation sued Kalshi in August. There has been little material movement in the case.
Will any cases get to the Supreme Court?
Most observers believe the legality of prediction markets will eventually reach the highest court in the land.
Why? These factors are all a recipe for the Supreme Court to take up a case involving prediction markets:
Long-recognized state interests in regulating gambling being pitted against the need for uniform, federal regulation of derivatives markets
A lack of clarity in the Commodity Exchange Act on who gets to regulate prediction markets
The potential for a circuit split at the appellate level